Economic Economic Decision Making Decision Making

Part BPart BMs. RamosMs. Ramos

Alta Loma High SchoolAlta Loma High School

What do we give What do we give up when we make up when we make

a choice?a choice?

Ms. Ramos

Maximizing utility: What we Maximizing utility: What we want when we choosewant when we choose

Utility:Utility: satisfaction from satisfaction from a good, service, a good, service, or action--- also or action--- also may be that it may be that it improves your lifeimproves your life VaccinationVaccination StudyingStudying

Ms. Ramos

http://library.thinkquest.org/08aug/00436/prevention.html

http://library.ucf.edu/Administration/LibraryDevelopment/ENewsletter/Volume3/E-mailIssue08-07.aspx

http://www.istockphoto.com/stock-illustration-8048785-silhouette-couples-dresses-up-party-dress-formal.php

Which show to watch?Which show to watch?

Which college to go to?Which college to go to?http://www.myspace.com/hiphopjunkieoo http://bandbent.wordpress.com/2009/12/10/

guest-blog-mtvs-jersey-shore/

http://www.cucirca.com/2008/04/09/watch-

family-guy-online/

http://www.degreedriven.com/California-colleges/Rancho-Cucamonga/Chaffey-College-WHDDT44LXT.html

http://www.sportslogos.net/logo.php?id=2671

http://www.workforceexchange.net/Resources/Discounts/Education/tabid/1220/Default.aspx

http://gawker.com/5265355/harvard-killer-captured

Ms. Ramos

Tradeoffs: what we give up Tradeoffs: what we give up when we choosewhen we choose

BusinessBusiness Build trucks or carsBuild trucks or cars Make trucks, tradeoff: % car Make trucks, tradeoff: % car

marketmarket SocietySociety

Guns vs. butterGuns vs. butter Military or civilian goods/programsMilitary or civilian goods/programs

PersonalPersonal

Ms. Ramos

Opp Cost: The best thing we Opp Cost: The best thing we give up to get what we wantgive up to get what we want

Decision matrixDecision matrix

Ms. Ramos

SourceSource PricePrice DeliverDeliveryy

CostCost

TransactioTransaction Timen Time

Delivery Delivery TimeTime

Online Online StoreStore

49.949.955

00 5 min5 min 7 min to 7 min to dwnloadwnloadd

CataloCatalogg

42.942.955

3.003.00 10 min10 min 1 wk for 1 wk for shippinshippingg

Big Big Box Box StoreStore

35.935.955

4.00 4.00 gas gas

moneymoney

1 hr or 1 hr or moremore

nonenone

RestauranRestaurantt

CostCost TimeTime Yummy Yummy FactorFactor

Ms. Ramos

Making “How Much” decisions Making “How Much” decisions at the marginat the margin

Marginal utility:Marginal utility: extra satisfaction extra satisfaction from consumption/actionfrom consumption/action

Negative utility:Negative utility: lack of pleasure lack of pleasure from consumption/actionfrom consumption/action

Law of diminishing marginal Law of diminishing marginal utilityutility

Ms. Ramos

Ms. Ramos

http://ice-cream-franchise.trendtodays.info/2010/06/25/the-exercise-and-the-law-of-diminishing-marginal-utility/

http://www.greenwaysound.com/forsale3.htm

How can we How can we measure what we measure what we

gain and lose when gain and lose when making choices?making choices?

Ms. Ramos

Measuring tradeoffs using the Measuring tradeoffs using the production possibilities frontierproduction possibilities frontier

Ms. Ramoshttp://www.netmba.com/econ/micro/production/possibility/

Measuring Opportunity Costs Measuring Opportunity Costs using the PPFusing the PPF

Ms. Ramos

http://www.netmba.com/econ/micro/production/possibility/

Ms. Ramos

http://www.netmba.com/econ/micro/production/possibility/

What does the curve illustrate?

Increasing costs

Measuring economics Measuring economics efficiency using the PPFefficiency using the PPF

Ms. Ramoshttp://www.netmba.com/econ/micro/production/possibility/

Measuring economics Measuring economics efficiency using the PPFefficiency using the PPF

Ms. Ramoshttp://www.netmba.com/econ/micro/production/possibility/

unattainable

Attainable, but inefficient

Reflecting economic change Reflecting economic change using the PPFusing the PPF

Ms. Ramos

http://www.netmba.com/econ/micro/production/possibility/

Change in productivity

http://www.investopedia.com/university/economics/economics2.asp

Shift out means what?

Increase-growing

economy

Ms. Ramos

Remember:Remember:Shift to the right- Shift to the right- increase/growing economyincrease/growing economy

Shift to the left- Shift to the left- decrease/shrinking economydecrease/shrinking economy

Pt w/in curve= inefficiencyPt w/in curve= inefficiencyPt outside curve= Pt outside curve= unattainableunattainable

Ms. Ramos

Ms. Ramoshttp://wps.prenhall.com/bp_case_econ_8/52/13546/3467867.cw/index.html

Ms. Ramos

STUDY!!! STUDY!!! STUDY!!! STUDY!!! STUDY!!!STUDY!!!

The unit exam will have the The unit exam will have the following:following: Fill in vocabularyFill in vocabulary 10-15 objective (multiple choice 10-15 objective (multiple choice

& graphs)& graphs) 2 short answer prompts- you will 2 short answer prompts- you will

be given the two & NOT have a be given the two & NOT have a choice this examchoice this exam

Ms. Ramos